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John Deaton Gives Reason Why SEC Would Have Been “Wrong” if It Had Classified ETH Security


CryptoLaw founder, John Deaton, believes the SEC would have been wrong if it had labeled ETH as security. The reason he gives is that ETH, like XRP, is an alphanumeric code. “If the SEC labeled ETH itself a security, it would be wrong.”

The CryptoLaw founder is also of the opinion that cryptocurrencies like XRP, ETH, ALGO, ADA, XLM and others that have traded for 5 to 10 years should be treated as commodities, not securities.

In December 2020, the Securities and Exchange Commission filed a lawsuit against Ripple Labs, alleging the company and its executives sold $1.3 billion worth of XRP in an unregistered securities offering. In the ongoing litigation, Ripple argues that XRP should not be classified as a security, which would subject it to more regulatory scrutiny.


At the center of Ripple’s lawsuit is the speech made by former SEC official William Hinman in 2018 stating that ETH was not a security. According to Ripple, the documents are required to prove that the company did nothing wrong and that the SEC arbitrarily chose winners and losers in the nascent cryptocurrency market.

Regulatory concerns

In a thread of tweets, the CryptoLaw founder weighs in on speculations that the SEC might go after ETH after its move to proof of stake, or the “Merge.” Deaton wrote, “Is ETH safe from Gensler? Ethereum’s transition to PoS in September is a dangerous bet on decentralization that could attract the eyes of regulators. Can we truly rule out Gensler suing ETH after the move to PoS?”

He added, “Some fear Gensler will go after ETH because of the growing pressure calling for an IG investigation.” The other reason some believe Gensler might go after ETH is to try and mitigate the claim that the SEC is choosing winners and losers through “selective enforcement.”

This comes after the SEC testified that it “doesn’t engage in selective enforcement” at a congressional hearing.

Deaton cited the case the SEC filed against Dragonchain, an ERC 20 token governed by the Ethereum network. The CryptoLaw founder stated his displeasure with the recent comments made by ETH creator Vitalik Buterin. While he had also highlighted conflicts of interest regarding the ETH free pass, Deaton says this still doesn’t make it right for the SEC to go after ETH and its founders.

He says, “Today’s ETH isn’t a security — even after the Merge, just because it may appear more of a security than XRP or other tokens, doesn’t make it one.”


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